SPEECHES & TESTIMONY

"Position Points"

On Tuesday, in remarks to Americans for Financial Reform, I discussed a proposal that could serve as an interim step prior to the implementation of mandatory position limits required by the new financial reform law. I detailed this "Position Point" proposal yesterday in testimony before Congress. I have also spoken with the heads of exchanges and market participants about Position Points. Here are the details of my proposal:

Once a trader reaches a specific Position Point, it triggers a new level of heightened regulatory scrutiny.

A Position Point is reached when a trader has an aggregate, on-exchange position limit of 10% of the first 25,000 contracts of open interest in one of 28 commodities (in energy, metals, and agricultural commodities), then 2.5% of open interest above 25,000 contracts.

This triggers a special call of that trader’s swaps positions.

If the swaps positions, netted with on-exchange positions, reduced the aggregate to below the Position Point, there is no regulatory action.

If the swaps positions, netted with on-exchange positions, increases the aggregate to above the Position Point, then regulators use all available authorities, as appropriate, to reduce those positions.